Assessing tail risks to the euro area economy

In Chavleishvili, Kremer and Lund-Thomsen (2023), we develop a novel approach to gauge the potential short- to medium-term costs and benefits of alternative policy actions when monetary policy faces trade-offs between financial and macroeconomic stability. The structural quantile vector autoregressive (QVAR) model – introduced by Chavleishvili and Manganelli (2023) – provides a flexible way of estimating the dynamic interactions between our main variables of interest: real GDP growth, inflation, short-term interest rates and financial stability conditions.^[2] The “flexible” attribute refers to the fact that the estimated interactions can be weaker or stronger in the centre and in the tails of the “joint probability distributions” of the model variables. Financial stability conditions are captured by two summary indicators measuring financial imbalances and system-wide financial stress, respectively. Using quantile regression allows us to uncover non-linearities in the dynamics of the model variables like in the seminal “growth-at-risk” paper by Adrian et al. (2019), which documents a much stronger impact of financial distress on the left tail of the growth distribution. By considering the entire probability distribution of our variables of interest, we can evaluate policy options not just in terms of their most likely outcomes, but also in terms of the tail risks associated with particularly undesirable states such as systemic crises. The quantification of tail risks thus lends itself to a risk management perspective on financial stability considerations in monetary policy (see Kilian and Manganelli, 2008), a perspective that focuses on the balance of upside and downside risks to inflation and economic activity rather than on the mean forecasts of both variables.

To operationalise financial stability, our model includes two measures widely used in ECB analysis. The first one is the Systemic Risk Indicator (SRI), which measures the financial cycle and, by extension, system-wide financial imbalances (see Lang et al., 2019). The second is the Composite Indicator of Systemic Stress (CISS), which quantifies systemic stress in the financial system (see Holló et al., 2012, and Chavleishvili and Kremer, 2023). Conceptually, one may think of the former as systemic risk ex ante, i.e. the risk of a future financial crisis, and of the latter as systemic risk ex post, i.e. materialised systemic risk. A typical financial boom-bust cycle would then see an elevated level of the SRI followed by a steep rise in the CISS as the bubble bursts and the system deleverages, with the Great Financial Crisis being a prominent example. The risk of such a boom-bust pattern poses an intertemporal financial stability trade-off for monetary policy: it can try to curb the financial boom by keeping interest rates higher than they would otherwise be, at the cost of weaker economic growth over the short run and at the benefit of a financial crisis being less likely and less severe over the medium term. In this article, however, we focus on another: the intratemporal financial stability trade-off for monetary policy, in which monetary policy itself may trigger more immediate financial instability.

The intratemporal financial stability trade-off in 2022

The circumstances prevailing in 2022 in the euro area and in many other places in the world, marked a stark turning point in the monetary policy stance. At the time, surging inflation called for a sharp tightening of monetary policy, even though economic growth was slowing after the post-pandemic rebound and financial stress was increasing on the back of the Russian aggression in Ukraine. In addition, the financial system at the time was vulnerable to a policy reversal because after a decade of accommodative monetary policy, the yield curve was flat and risk premia were at historically low levels, implying elevated risks to the profitability of banks and other financial intermediaries from a sharp rise in short-term interest rates.

To quantify the intratemporal financial stability trade-off in the euro area, we forecast the full distribution of our model variables over a period of four years, starting with the fourth quarter of 2022 (Q4 2022). In the baseline scenario, we fix the path of interest rates to the expected short-term market rates from the September 2022 Survey of Monetary Analysts (SMA) conducted by the ECB. In the baseline, we also require the mean forecast of real GDP growth, HICP inflation and commodity prices between Q4 2022 and Q4 2024 to reflect the ECB’s publicly available macroeconomic projections. This approach allows us to replicate the context in which policymakers were deciding on the path forward at the time while still considering macro-financial tail risks.

In addition to the baseline scenario, we also consider two alternative policy scenarios with different paths of short-term interest rates. The first one is “front-loading”, whereby policy rates are hiked more quickly. This helps prevent inflation from becoming entrenched, but it can also hurt systemically relevant banks and other financial intermediaries that have become particularly vulnerable to interest rate risk. The March 2023 banking turmoil in the United States and elsewhere provides a clear example of how monetary tightening may induce, or expose, financial fragility (see, e.g., Jiang et al., 2023, and Acharya et al., 2023). The second scenario considers a gradual monetary tightening. This may alleviate strains on financial stability, but at the cost of making high inflation more persistent, thereby creating the risk of long-term inflation expectations becoming de-anchored from the ECB’s 2% target. All three interest rate paths are illustrated in Chart 1.

Chart 1

Counterfactual paths for short-term interest rates in the euro area

Chart 2 plots the projected paths of the mean as well as the 10^th and 90^th percentiles of the forecast density of real GDP growth and the CISS using the three interest rate paths above. As previously noted, in the case of real GDP growth, the dotted line is restricted to meet the ECB’s growth projections at the time. The 10^th and the 90^th conditional percentiles represent the downside and the upside tail risks around these mean projections, respectively.^[3] Looking at the chart, we see that downside risks to real GDP growth (blue lines, left chart), as well as upside risks to systemic stress (red lines, right chart) are amplified by the interest rate front-loading in the short term compared to the baseline, and that the effects are larger compared to the respective opposite tails. Tightening monetary policy above market expectations increases the probability of realising a high level of systemic stress, in turn feeding into downside risks to growth. In contrast, a more gradual tightening has the opposite effects.

Chart 2

Forecast distributions of euro area real GDP (left) growth and the CISS (right) in the three policy scenarios

Overall, when comparing the short- to medium-term costs and benefits of the scenarios vis-à-vis the baseline forecast, the results generally do not support a more aggressive tightening path than what was expected by market participants in the autumn of 2022. The elevated downside risks to growth may outweigh the only modest gains in lower predicted inflation. That said, a policymaker who is particularly concerned about inflation expectations becoming de-anchored from target inflation may still be inclined to favour tighter policy. On the other hand, if policymakers were more concerned about the risk of causing severe financial distress by front-loading policy, the scenario could be modified to resemble, for example, the so-called “taper tantrum”, an episode of severe financial stress that occurred in 2013 when the Federal Reserve hinted at tapering its bond-buying programme.

Another consideration is that we have modelled monetary policy rather simplistically, with short-term rates being the only instrument. Today, monetary policymakers have several tools available, some of which can be used to separately target price and financial stability concerns, potentially mitigating the intratemporal financial stability trade-off. Still, a policymaker may prefer to avoid sparking financial stress to begin with, even if it can be contained with the right combination of tools.

Monetary policy from a risk manager’s perspective

In this article, we sketched a novel empirical approach to quantify the macroeconomic costs and benefits of monetary policies which take financial stability considerations explicitly into account. The approach has the distinct advantage that financial stability considerations are not introduced ad hoc or as pure “side effects” of monetary policy. In contrast, financial stability trade-offs enter the policy calculus through their direct effects on future inflation and economic activity. Our approach allows monetary policymakers to adopt a risk management perspective when confronted with elevated macroeconomic tails risks associated with certain risks to financial stability.

Source: ECB Europa

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Source: France 24

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From the European Union’s Green Deal Industrial Plan and the United States’ Inflation Reduction Act (IRA) to Japan’s Green Growth Strategy and the Korean New Deal, industrial policies aimed at accelerating the energy transition are proliferating in wealthy, technologically advanced economies.

Many developing economies are also designing and deploying state-led projects to foster green industrialisation, as competition intensifies for electric vehicles (EVs), so-called transition minerals, and clean energy.

For example, several African countries, including South Africa, Kenya, Mauritania, Egypt, Djibouti, Tunisia, Morocco, and Namibia, have enacted state-led initiatives to support the development of green hydrogen. Others, including Indonesia, Bolivia, and Chile, are implementing national strategies to stimulate industrialization based on the extraction and processing of nickel, cobalt, copper, lithium, and other transition minerals and metals.

These policies use a broad range of instruments – including subsidies, regulations, incentives, and diverse state-business arrangements – and differ widely in terms of the public and private resources at their disposal. But they all seek to tackle three crises simultaneously: economic stagnation, polarised and precarious employment, and intensifying climate change.

The revival of industrial policy is based on the logic that addressing all three crises will create a virtuous cycle: targeted investment in green manufacturing and energy will boost economic activity, create well-paying jobs, and usher in a low-carbon economy. The Biden administration’s “modern American industrial strategy,” comprising the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the IRA, exemplifies this approach. What has been called the “Biden three-fer” is designed to boost US competitiveness in key industries vis-à-vis China, provide better economic opportunities for American workers, and accelerate decarbonization.

But the win-win narrative undergirding these new industrial strategies tends to obfuscate the risk that solving one problem may exacerbate another. In fact, the tensions between these policy objectives are already visible. For example, the decarbonisation of the economy may not create as many decent jobs as initially expected. In the US, both car companies and the United Auto Workers union have warned that the shift to manufacturing EVs, which require fewer parts, could lead to job losses. Some of these jobs will be redistributed to battery production, but this may be cold comfort for American and European auto workers, given China’s dominance over the global battery supply chain.

At the same time, the growth of green industries can result in other environmental harms. Despite aiming to generate employment and value through the production of transition minerals, the industrialisation strategies of several Global South countries tend to entrench extractive practices. For example, Argentina, Bolivia, and Chile – South America’s “lithium triangle” – are seeking to capture various stages of the lithium supply chain, from mineral extraction to processing to battery assembly. But the growth of this industry threatens to deplete water supplies, degrade soil, and disrupt habitats, often in zones inhabited by indigenous Andean peoples. Similarly, the production of semiconductors, which are at the heart of clean tech, is energy-, water-, and land-intensive and releases perfluorocarbons and other potent greenhouse gases into the atmosphere.

Finally, economic stagnation can have a destabilising impact on domestic politics, impelling governments to aim for a higher growth rate regardless of the environmental costs. For example, British Prime Minister Rishi Sunak recently announced a series of U-turns on the government’s net-zero pledges. Shedding burdensome climate commitments may seem like a politically attractive strategy to boost immediate growth prospects. But – and herein lies the contradiction – longer-term growth will at least partly depend on governments ensuring that their economies are competitive in the green industries of the future.

As these examples show, industrial policy is not a silver bullet for the intersecting crises of our times. The policy objectives of environmental sustainability, industrial dynamism, and full employment are difficult to reconcile and require hard political choices about resource allocation, strategic priorities, and, crucially, the distribution of economic and social costs. Moreover, the trade-offs will grow more complex and challenging as global warming worsens and growth continues to sputter. What we call the “wicked trinity” of contemporary governance – climate catastrophe, economic stagnation, and surplus humanity – will not go away anytime soon. In fact, it will likely shape the trajectories of public policymaking long into the future.

This is not to say that policymakers should give up on designing ambitious strategies to address these crises. On the contrary, swift and effective action is an absolute necessity. Yet packaging these plans in win-win narratives that paper over the difficult trade-offs they involve significantly raises the risk that governments will lose popular support. The complex and conflicting nature of these policy objectives means that even the best-designed strategies will fall short, at least in some respects. This is unavoidable and an important component of learning-by-doing.

To avoid being seen as breaking promises, policymakers must embrace, rather than dismiss, the tensions and trade-offs at the heart of green industrial policies and subject them to public deliberation. This is essential to securing broad support for state-led decarbonisation projects. Such an approach would help build robust, transparent governance structures rooted in the principles of democratic deliberation and public oversight and control. As matters stand now, many industrial strategies are the product of top-down, technocratic policymaking processes, despite all the talk of “leaving no community behind” and a “just green transition.”

Subjecting the economy to democratic decision-making in this way would, admittedly, constitute a radical challenge to the current system of private ownership and market coordination. But it is essential to secure and maintain popular legitimacy for green industrial policies, as well as to facilitate collective and efficient decision-making and minimise mismanagement. Otherwise, we risk a public backlash that impedes the collective action needed to safeguard our future on this planet.

Source : The Independent

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Startups can be at the forefront of economic recovery, job creation, and a more sustainable future. They are the most innovative actors in the economy and an economic force to be reckoned with. However, while they are the giants of the future, they are more often than not overlooked in policymaking. 

In the last five years alone, startups have been met with a tidal wave of digital regulation. While well-intentioned, overregulation often creates a hostile environment for innovative businesses by implementing market barriers and imposing additional operating and compliance costs.

The 2024 European Union Elections offer an opportunity to reverse this trend by ensuring that startups have a seat at the policy table so that Europe can build smart regulations and at the vanguard of startup innovation.  

Allied for Startups and its Members have published its EU Election Startup Manifesto, a standard with which startup communities and leaders will evaluate the success of any candidate, party, or group seeking a leading role in a democratic Europe in 2024.

While these policy prescriptions are a baseline of the needs of the growing entrepreneurial communities of Europe, support for these entrepreneurs and job creators must be aligned with an acknowledgment of the need for further investment in diversity, equity, and inclusion.

This integrated approach is likely the most effective pathway toward ensuring Europe’s continued growth and economic success.

What do startups need from policymakers?

Policymakers must embrace strategies and initiatives that will foster a growth-oriented environment for startups to deliver on the digital and green transitions as promised.

Hence, we propose a variety of actions, including:

Appointing a dedicated Commissioner for Digital Entrepreneurship, in order to simplify and harmonise all regulation that affects startups in a single place.

Introducing a startup and scale-up test for legislation, essential to creating regulatory frameworks that startups can not only comply with but thrive under.

Streamlining talent acquisition through an efficient EU-wide startup visa and simplifying regulatory processes with an EU company status.

Startups advocate for a harmonised level-playing field that allows them to innovate, emphasizing the importance of safeguarding net neutrality, fortifying the Digital Single Market, and strong research, investment and digital skills framework to nurture a competitive and thriving ecosystem.

What are startups’ expectations across EU institutions?

Startups’ expectations across EU institutions extend to the creation of dedicated groups and teams within the institutions, integrating startup perspectives into relevant deliberations, nominating counterparts, and emphasizing startups and SMEs in official titles.

Effectively, having a seat at every policy table.

While a new Parliament is on the ballot next year, startups recognize the importance of and positive outlook for all EU institutions to build a sustainable, lucrative future for European startups.

Prioritising startups’ needs during this election season holds the potential to transform Europe into an environment where innovation thrives, startups prosper, and Europe secures a prominent role in the global entrepreneurial landscape.

With these 10 items at the forefront of voter outreach and discussion, Europe can re-emphasise its commitment to building a strong startup community and lead the global economy.

Source : Tech EU

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BRUSSELS — Hungarian Prime Minister Viktor Orbán is threatening to block all European Union aid for Ukraine, as well as the country’s future accession to the bloc, unless EU leaders agree to review their entire strategy of support for Kyiv, according to a letter seen by POLITICO.

In the letter, addressed to European Council chief Charles Michel, the Hungarian leader says that no decision on funding for Ukraine, the opening of accession talks to the EU, or further sanctions against Russia can be taken until this “strategic discussion” happens when leaders gather in Brussels in mid-December.

“The European Council should take stock of the implementation and effectiveness of our current policies towards Ukraine including various assistance programs,” Orban writes in the letter, which is undated but bears the stamp of his office.

He also asks why Europe should continue to support Ukraine at a time when the United States, which has provided the bulk of military aid for Kyiv, may not be able to continue funding due to partisan deadlock over future support.

“The European Council must have a frank and open discussion on the feasibility of the EU’s strategic objectives in Ukraine,” the letter states.

“Do we still regard these objectives realistically attainable? Is this strategy sustainable without robust support from the United States? Can we take continuing support from the United States for granted? How do we conceive the security architecture of Europe after the war,” it goes on.

It adds that “the European Council is not in a position to make key decisions on the proposed security guarantees or additional financial support for Ukraine, endorse further strengthening of the EU sanctions regime or agree on the future of the enlargement process unless a consensus on our future strategy towards Ukraine is found.”

Working around Hungary

Orbán’s letter raises the stakes in a long-running standoff between Budapest and Brussels, which is holding back €13 billion in EU funds for Hungary over concerns that the country is falling afoul of the EU’s standards on rule-of-law.

Without saying so directly, the letter suggests that Budapest could use its veto power to block the disbursement of a planned €50 billion in aid for Ukraine — money that’s needed to fund the Ukrainian government while its armed forces fight back against a full-scale Russian invasion.

In addition to the €50 billion, Orban is threatening to block €500 million in planned military aid for Ukraine, as well as the opening of formal negotiations for Kyiv to join the 27-member union, which leaders were hoping to approve at the next gathering of the European Council on December 14 and 15.

According to one EU diplomat who was granted anonymity to discuss confidential deliberations, Orbán has “booby-trapped” the entire EU decision-making process on Ukraine as part of a strategy to raise pressure on the European Commission to release the €13 billion to Hungary.

The diplomat went on to say that while on other occasions, Budapest has abstained on key votes and allowed the EU to slap sanctions on Russia, on this occasion, “I don’t see that happening.”

“It’s not a matter of neutrality for Hungary,” said the envoy. “It’s about leverage.”

Orbán’s threat comes at a particularly sensitive time for Ukraine, as Kyiv’s armed forces struggle to make gains against invading Russian troops and just after United States National Security Adviser Jake Sullivan has warned that the “window is closing” on U.S. aid for Ukraine.

With Hungary ramping up tensions and threatening to hijack the December summit of EU leaders, some countries are already contemplating ways to work around Budapest and keep aid flowing to Kyiv.

One such workaround could see EU countries sending financial aid to Ukraine via bilateral arrangements rather than via EU structures such as the European Peace Facility, which coordinates EU military aid for Kyiv — effectively freezing out Budapest.

But that approach wouldn’t work when it comes to opening formal negotiations for Kyiv to join the EU, as Hungary would have to be part of that process. As a result, and to preserve EU unity, the same diplomat said it wasn’t a good idea to freeze out Hungary quite yet.

“I understand where they are coming from,” the diplomat said with regard to those calling for a Hungary workaround on military aid. “But doing that [circumventing the EPF] would basically undermine the one European mechanism we have for support to Ukraine.”

“It’s the one thing we can show where the EU as a bloc is supporting Ukraine, which shows unity to Russia and also to the United States,” the diplomat continued.

In the event of a Hungarian veto, another option for the EU is simply to let the clock keep running and push key decisions on Ukraine policy to early next year, as Kyiv won’t reach a budget cliff-edge until March.

By deferring a decision on unfreezing EU funds for Budapest, the European Commission could turn the tables by tightening the financial screws on Budapest and forcing compliance on Ukraine.

“It’s arm-wrestling,” added the diplomat, who said the European Commission had so far shown great skill in defusing potential explosions with Budapest.

Source : Politico

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The shocking success of Geert Wilders’ far-right PVV party in Dutch elections has left climate activists fearful of a drastic shift to fossil fuels and a rollback of climate policies if it manages to form a government.

Best known abroad for its rhetoric against Muslims, the PVV, which came first in Wednesday’s election but may struggle to find coalition partners, has taken a hard line on policies to stop the planet getting hotter.

The party wants to extract more oil and gas from the North Sea and stop building wind turbines and solar farms. It also wants to abolish the Dutch climate law and leave the Paris agreement on climate change.

“If these elections make one thing clear, it’s that politics will not save us,” said Yolande Schuur from the Dutch branch of activist group Extinction Rebellion.

The PVV, whose success with voters was praised by far-right leaders across Europe on Thursday, has said it is not going to waste billions on “pointless climate hobbies”.

Its manifesto says that the climate has always changed and that the Netherlands – 26% of which lies below sea level – can adapt to further changes. “We will stop the hysterical reduction of CO₂ , with which we, as a small country, mistakenly think we can save the climate.”

The Dutch are among the biggest polluters in the world, and also in Europe. Per person, the Netherlands pumped more planet-heating gas into the atmosphere in 2021 than all other EU member states bar Estonia, the Czech Republic, Ireland and Luxembourg.

“PVV is close to climate denialism,” said Heleen de Coninck, professor of climate policy at Eindhoven University of Technology. “It’s not quite denying that climate change is happening and human-made any more, but this is a recent turn.”

Despite this, said De Coninck, who also serves as the vice-chair of the Netherlands Scientific Climate Council, the party’s most extreme views may be tempered even if it is part of a ruling coalition.

“For many of its proposals, the party will not find a majority at all in parliament,” she said. “There was an easy majority for the climate law in parliament and that has not changed.”

Kees van der Leun, managing director of energy consultancy Common Futures, agreed that most Dutch lawmakers favoured “staying the course”.

The country’s climate policies, he said, are guided by EU commitments, recent efforts to kick its dependence on Russian gas and growing interest from businesses. “In my view, the election outcome isn’t likely to significantly slow down our climate policies.”

The EU has committed to cutting emissions by 55% by the end of the decade from 1990 levels before reaching net zero by 2050. The Netherlands is a vocal force in EU climate debates and its former deputy prime minister Wopke Hoekstra is the bloc’s top climate envoy.

Dick van Dam, a researcher at the Netherlands environment agency, said the influence of the election on the climate “may be felt more in Brussels than in The Hague”.

But the prospect of a so-called “Nexit” could change this. PVV wants a referendum on taking the Netherlands out of the EU, though Wilders told Dutch media on Thursday that cutting immigration was his priority.

Two other centre-right parties from which Wilders may seek support – the VVD of the outgoing prime minister Mark Rutte and the NSC of Pieter Omtzigt – have committed to remaining in the EU and supporting the Paris agreement.

“Wilders will need at least two other parties to form a coalition,” said Silke Mooldijk, an analyst at the environmental thinktank NewClimate Institute. “While climate mitigation is not a top priority of either the VVD or the NSC, we don’t expect these parties to agree to a complete standstill of national climate policies.”

Climate activists are more fearful. Activists from Greenpeace protested against his success in The Hague on Thursday afternoon, waving banners that said: “No climate denier as our prime minister.”

Andy Palmen, director of the Dutch branch of Greenpeace, said: “The climate, our oceans, healthy nature and sustainable agriculture are all at stake.”

He added that the Netherlands does not need a leader who denies climate change but someone who knows how to unite people with honesty, hope and respect. “Wilders has shown that he is not the right person for that.”

Schuur from Extinction Rebellion said the climate policy of the previous government was already inadequate and that the PVV has enough seats to align with delayers and deniers in other parties to block needed policies.

“Even if the PVV is not part of the new government, they can frustrate necessary climate action with 37 seats [out of 150] in the House of Representatives.”

Although small, the Netherlands is an outsize polluter and hub for European industry and agriculture. Its efforts to cut nitrogen pollution after a court ruled levels of the pollutant too high led to widespread protests from farmers and support for the Farmer Citizen Movement, which won the most seats in the Dutch senate earlier this year.

A poll from Ipsos before the election found nitrogen is one of the most polarising issues for Dutch voters – 30% think livestock herds should be limited to cut nitrogen emissions, while 40% disagree.

Still, said De Coninck, voters may have been more concerned with trust in government than the environment, particularly on the right.

“Even though this is a black page in Dutch election history – with a populist extreme-right party becoming so big – I don’t think this was a climate election.”

Source : The Guardian

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The EU’s foreign policy chief on Saturday expressed “regret” over the resumption of Israeli attacks on the Gaza Strip, emphasizing Tel Aviv’s obligation to respect international humanitarian law and the laws of war, which he described as “not only a moral obligation but also a legal one.”

“The way Israel exercises its right to self-defence matters. It’s imperative that Israel respects International Humanitarian Law and the laws of war,” Josep Borrell wrote on X.

His remarks came after the Israeli army resumed attacks on Gaza after declaring the end of a week-long humanitarian pause on Friday morning, for which Borrell expressed regret, fearing that the already high civilian death toll would rise further.

Reiterating his call for Israel to respect international law, he stressed that this is “not only a moral obligation but a legal one as well.”

He also mentioned the increasing violence in the occupied West Bank. Citing the UN figures, Borrell said 271 Palestinians have been killed by Israelis since Oct. 7.

“It’s not sufficient humanitarian pauses should be resumed, while simultaneously working towards a comprehensive political solution for all the Palestinian territories,” he added.

The Israeli army resumed bombing the Gaza Strip early Friday after ending a week-long humanitarian pause with the Palestinian resistance group Hamas.

At least 178 Palestinians have been killed and 589 injured on Friday in Israeli airstrikes, according to the Gaza Health Ministry.

The humanitarian pause began on Nov. 24 as part of an agreement between Israel and Hamas to temporarily halt fighting to allow hostage swaps and aid delivery.

More than 15,000 Palestinians, mostly children and women, have been killed in Israeli attacks since Oct. 7 following a cross-border attack by Hamas.

Around 1,200 Israelis have also been killed, according to official estimates.

Source : AA

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The EU foreign policy chief on Wednesday said that he is “appalled” by the high number of casualties caused by Israeli airstrikes on the Jabalia refugee camp in northern Gaza.

“Building on EU Council’s clear stance that Israel has the right to defend itself in line with international humanitarian law and ensuring the protection of all civilians, I am appalled by the high number of casualties following the bombing by Israel of the Jabalia refugee camp,” Josep Borrell said on X.

“The right to self-defence should always be balanced by the obligation to spare civilians to the greatest extent possible,” Borrell said, echoing UN Secretary-General Antonio Guterres’ remarks.

Underlining that the EU has been calling since last week for humanitarian corridors and pauses for humanitarian needs, he said: “With each passing day, as the situation becomes more and more dire, this is more urgent than ever.”

“The safety and the protection of civilians is not only a moral, but a legal obligation,” he stressed.

Airstrikes on the refugee camp killed and injured hundreds of people, according to the Interior Ministry in the besieged enclave, which said Israel dropped six bombs on the residential area.

The Israeli army has expanded its air and ground attacks on the Gaza Strip, which has been under relentless airstrikes since the Palestinian group Hamas launched a surprise cross-border offensive on Oct. 7.

Paltel Group, the company providing communications services in Palestine, reported another widespread outage of internet and phone service in Gaza early Wednesday.

Besides a large number of casualties – at least 8,525 Palestinians and 1,538 in Israel – and displacement, basic supplies are running low for the 2.3 million people in Gaza.

Israeli Prime Minister Benjamin Netanyahu has rejected growing calls for a cease-fire, saying it would be a “surrender” to Hamas and “that will not happen.”

Source : AA

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President Volodymyr Zelenskyy has stated that Ukraine needs to get used to the fact that the country’s policies are bringing it closer to the moment when the Ukrainian flag will be hoisted alongside the flags of other EU member states in Brussels.

Quote: “Ukraine has walked a very long path – from a point where many didn’t believe in the possibility of our alignment with the European Union during a full-scale war, to achieving the status of a candidate country at record speed and fulfilling the necessary prerequisites for opening negotiations.

This is proof, time and time again, that Ukraine can accomplish significant achievements when we work in a united and confident manner, in the interests of our independence and of all Ukrainians…

All of us in Ukraine now need to get used to the fact that our domestic policy is a policy of European integration, and that is what is bringing us closer to the moment when the Ukrainian flag will be flying in Brussels alongside the flags of all the other EU member states.”

Details: Zelenskyy added that his team is doing everything possible to be ready for full accession to the European Union and to adapt all institutions and standards to European rules.

Source : Yahoo

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A landmark EU anti-deforestation regulation that entered into force in June 2023 could come down hard on smallholder farmers in mainland Southeast Asia who produce a significant proportion of the region’s forest products exported to the bloc, forest trade experts say.

The EU’s deforestation-free regulation (EUDR) aim to prevent seven forest-related commodities and their products from entering the EU market if they’re found to be linked to deforestation.

The rule requires producers and companies trading timber, palm oil, soy, rubber, cattle, cocoa and coffee into the EU to provide detailed evidence proving their goods were not grown on land deforested since 2020. The new regulations give producers and companies until December 2024 to fully comply.

While the regulation is a step toward transparency and international deforestation-free supply chain management, observers say it places millions of smallholders who depend on access to the EU market in a vulnerable position. Many small-scale farmers lack the technical capacity and financial capital to meet the hefty due diligence requirements of the new rules, experts say.

Smallholders produce 95% of Vietnam’s coffee, 42% of Indonesia’s palm oil, and 95% of Thailand’s rubber. Finding ways to avoid small-scale producers being shut out of EU supply chains should therefore be a top priority for both exporting countries and the EU, according to Phuc Xuan To, a policy adviser at sustainable finance think tank Forest Trends. 

“There are a lot of concerns and worries about [the EUDR],” Phuc told Mongabay. “[E]ntire sectors, like the Vietnam coffee industry, are unsettled; many don’t know where to start and it’s particularly challenging for smallholders.”

In Vietnam alone, more than 2 million smallholders operating across roughly 6 million plots of land are engaged in the country’s three major forest-related commodities that enter EU markets and are directly affected by the new rule. Vietnam’s timber, rubber and coffee generate combined revenue from the EU in excess of $2.5 billion annually.

Among the major challenges of the new rule is a stipulation that producers and traders provide precise geographical coordinates for all plots of land from which their products are sourced. This is meant to enable buyers in the EU to trace commodities back to the farm where it was grown in order to verify that they’re deforestation-free.

However, the process of verifying land use rights and plantation registration certification, let alone gathering geolocation data, is protracted, complex and slow in many parts of Southeast Asia. Phuc said the monitoring systems and databases simply don’t exist. It will be “highly challenging if not impossible” over the short term, he added.

A major stumbling block is working out how to finance the initial stages of putting land registration and geolocation mechanisms in place. “Getting land-use titles and clear land demarcations requires a lot of resources,” Phuc said. “You have to go to the land, measure the land, mark the boundary and so on, it costs a lot of money. The [Vietnamese] coffee sector estimate it would have to pay $3 billion for that sort of background work. Who is going to pay for that? The smallholders?”

Crucially, the new regulation risks neglecting the intricate webs of cross-border trade in forest products in Southeast Asia. By focusing on onerous and expensive data collection at the farm level, Phuc told Mongabay, the regulation is missing out on the opportunity to address the “substantial” regional cross-border trade of deforestation-linked goods that could ultimately reach EU markets.

“If we look at how Vietnam imports timber from Laos, rubber from Cambodia, coffee from Laos … once it enters the country it is mixed with locally sourced supplies and then exported to Europe,” Phuc said. “How can those imports be traced? We’re not talking about small-scale imports here, there’s more than $1 billion worth of rubber imported from Cambodia each year, it’s on a massive scale.”

Such mixing of forest products via processing countries like Vietnam typically means that commodities that harm local people and the environment in other countries could still be deemed as “legal” and enter supply chains to the EU.

A lot of work remains to be done before the EU rule can be effectively applied to cross-border trade, Phuc said. “The cross-border aspect is not factored into the new regulations. The tracing of where commodities are produced in each country is complex, and to some degree, I don’t think it’s going to work, at least in the near future.”

Protecting smallholders

Experts have also highlighted that given the new EU rule relies on national laws and human rights standards, which are often weak and poorly applied in many parts of Southeast Asia, smallholders are particularly vulnerable to a spectrum of abuses. 

If smallholders lacking official land-use rights, land tenure, or capacity to comply with the new regulation are shut out from the EU market, support systems that safeguard against land grabbing, dispossession and violence must be in place, said Nathalie Faure, a senior program officer at RECOFTC, a Thailand-based community forestry nonprofit. The new regulations have the potential to stimulate such much-needed legal reforms, she added.

“The purpose of the regulation is really to create the sustainability of products, so there’s potential for having better access to information, better rules around sustainability, greening local economies,” Faure told Mongabay. “And it might create legal reforms in relation to certain aspects, such as land tenure, sustainability and trustability.”

Faure added that there’s a risk of traders cutting ties with smallholders deemed “high risk” under the new EU rule and switching to larger, less scrupulous and less ethical suppliers, but with larger capital to comply. This, ultimately, would undermine the EU’s intention, she said.

Tran Quynh Chi, a regional director at IDH – the Sustainable Trade Initiative, a social enterprise headquartered in the Netherlands, told Mongabay the new rules serve as an opportunity for forest commodity sectors to develop more responsible approaches to business. “This is really an opportunity to make the markets and the sector transformed toward more transparency and sustainability,” Tran said.

Tran said 10-15% of smallholders engaged in the coffee sector in Vietnam live in poor rural regions close to forest edges. If mechanisms aren’t put in place to help such producer groups maintain access to supply chains, “there’s a very big risk that they’ll be excluded from the EU market, and that will drive up poverty levels,” she said.

Tran and her colleagues are now piloting a product traceability system in Vietnam in cooperation with smallholders, local governments and companies, with the end goal of developing sustainable business models that encourage producers and companies to join traceability schemes.

They’re also helping smallholders form farmers’ groups and cooperatives, “where they have sustainable governance structures and can reliably access big markets like the EU and meet the new regulation requirements.”

Ensuring that no one is left behind isn’t only important for people’s well-being, but also for environmental protection, Tran said. Smallholders living close to natural forests who are unable to comply with the new regulations “might be forced to go further into the forest to eke out a living” if excluded from EU supply chains.

“If we don’t provide them an alternative, then they have no other choice but to cut the forest. They still have to live,” Tran said.

Source : Mongabay

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